The Inland Revenue Authority of Singapore (IRAS) has successfully identified 279 high-income earners who engaged in artificial arrangements to minimize their tax liabilities. These individuals, including professionals like doctors and dentists, used complex corporate structures to channel their earnings, effectively avoiding the higher personal income tax rates that apply to top earners. By reporting artificially low salaries and extracting the remainder of their income as tax-exempt dividends or shareholder loans, these taxpayers sought to exploit the gap between personal tax rates, which can reach 24 percent, and the lower corporate tax rate of 17 percent.
Between 2021 and 2025, IRAS investigated 124 of these cases, successfully recovering $49 million in additional taxes. The authority utilized Section 33 of the Income Tax Act, a powerful legal provision that allows the taxman to disregard or vary any arrangement that lacks a genuine commercial purpose and is created solely for tax avoidance. In a recent high-profile case, the High Court dismissed a challenge from three doctors who attempted to contest the additional taxes levied on their total income, reinforcing the authority's power to clamp down on such schemes.
These arrangements often involved setting up private companies to receive professional income, with the owners paying themselves salaries far below market rates. While corporate entities in Singapore enjoy various tax concessions to support entrepreneurship and growth, these individuals were found to be using these structures as a shield rather than for legitimate business expansion. The crackdown serves as a stern reminder that while tax planning is legal, artificial schemes designed to bypass tax obligations will face rigorous scrutiny and financial penalties.